TOKYO – The financial misconduct trial of former Nissan executive Greg Kelly began Tuesday with Kelly saying he committed no crimes and was only trying to keep his star boss Carlos Ghosn from leaving.
The charges being heard at Tokyo District Court center around Kelly’s alleged role in failing to report to Japanese authorities the future compensation of Ghosn, who led Nissan Motor Co. for two decades.
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Japanese prosecutors outlined allegations of what they said was a complex and clandestine scheme to pay Ghosn more than the amount the company had reported as compensation. Kelly denied the allegations and said everything that was done was intended to keep Ghosn, whom he called an “extraordinary executive,” at Nissan.
“This was all in the best interests of Nissan,” Kelly said, reading from a statement.
“I deny the allegations. I was not involved in a criminal conspiracy,” said Kelly, whose trial opened on his 64th birthday.
Ghosn was arrested in late 2018 at the same time as Kelly but jumped bail and fled to Lebanon late last year. Since Lebanon has no extradition treaty with Japan, he may never face trial. But Kelly evinced no rancor over being left to face trial himself.
He recounted how in the late 1990s, when Nissan was losing money, the French automaker Renault bought a stake in Nissan and sent in Ghosn to help turn the ailing Japanese car maker around.
The experts believed Nissan was doomed, Kelly said, but “Mr. Ghosn proved the experts wrong. Under Mr. Ghosn, Nissan became very profitable.”
Top management at Nissan fretted they might lose Ghosn, who occasionally complained he could make more money elsewhere even though he was paid more than most Japanese top executives. They researched lawful methods to provide incentives for him to say, consulting with in-house and outside attorneys to try to retain him.
“The evidence will show that I did not break the law,” said Kelly, who has a law degree and was hired by Nissan in the U.S. in 1988.
Kelly’s head defense lawyer Yoichi Kitamura said little apart from: “My client is not guilty.”
Later on in the session, another attorney gave more details about the defense's position, stressing that some of the alleged schemes to pay Ghosn were considered and not finalized, or never signed by Ghosn. Kelly was not involved in a couple of the schemes, he argued.
Kelly's wife, Dee, who attended the session, defended her husband outside the courthouse. She said her husband had been going over the evidence for the trial to prepare for the case.
“Greg has done nothing wrong," Dee Kelly said. “I’m very proud of him. He’s an honorable man.”
Nissan is also facing the same charges in the trial as Kelly but has acknowledged guilt and is not contesting the charges. It is paying a 2.4 billion yen ($22.6 million) fine.
A representative for Nissan told the court the pay schemes did not benefit Nissan and were aimed at Ghosn's personal gain, but instead damaged investor trust and tarnished the company's brand.
The prosecutors said that in 2010 Ghosn returned to Nissan 700 million yen (about$6.6 million) that exceeded the amount Nissan would disclose as his compensation. The company considered various ways to pay more compensation to Ghosn, such as paying him through an overseas or outside company, selling him real estate at a discount, giving him a loan that would be forgiven later or increasing his post-retirement compensation.
They said the discussions of how to pay Ghosn more than would be legally disclosed were made “on the premise that he was certain to receive the payments.”
Ghosn has vigorously defended himself, saying he is innocent. The defense has long argued Ghosn’s compensation was never agreed upon, let alone paid.
As is routine in Japanese trials, Tokyo District Prosecutors read from a long opening statement outlining their allegations that Ghosn's compensation was underreported from 2011-2018 by almost half. They contend these were “false entries," a violation of the Financial Instruments Law.
Business experts say Japanese executives are often promised pay but with conditions such as the company performance, and they can end up not getting any money, meaning that how such compensation should be reported may be unclear.
Acquittals are extremely rare in Japanese criminal trials, more than 99% of which result in convictions. Critics have said the system is unfair. But Japanese officials defend the system as having led to a relatively crime-free society, even saying that only those who are almost certainly guilty are being charged.
The maximum penalty for the charge of falsifying fiscal statements is 10 years in prison. The trial is expected to continue for about a year.
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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama